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The pay-as-you-go pension system as fertility insurance and an enforcement device

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Author Info
Sinn, Hans-Werner
Abstract

A PAYGO system may serve as insurance against not having children and as an enforcement device for ungrateful children who are unwilling to pay their parents a pension. In fact, the latter was Bismarck’s historic motive for introducing this system. It is true that the PAYGO system reduces the investment in human capital, but if it is run on a sufficiently small scale, it may nevertheless bring about a welfare improvement. If, on the other hand, the scale of the system is so large that parents bequeath some of their pensions to their children, it is overdrawn and creates unnecessarily strong disincentives for human capital investment.

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Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 938.

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Date of creation: 2004
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Handle: RePEc:lmu:muenec:938

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Related research
Keywords: Fertility insurance Human capital investment Pension system

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J1 - Labor and Demographic Economics - - Demographic Economics

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Gary S. Becker & Robert J. Barro, 1988. "A Reformulation of the Economic Theory of Fertility," NBER Working Papers 1793, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Lindbeck, Assar & Weibull, Jorgen W, 1988. "Altruism and Time Consistency: The Economics of Fait Accompli," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1165-82, December. [Downloadable!] (restricted)
  3. Jensen, Eric R, 1990. "An Econometric Analysis of the Old-Age Security Motive for Childbearing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(4), pages 953-68, November. [Downloadable!] (restricted)
  4. Gordon, Roger H. & Varian, Hal R., 1988. "Intergenerational risk sharing," Journal of Public Economics, Elsevier, vol. 37(2), pages 185-202, November. [Downloadable!] (restricted)
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  5. Rosati, Furio Camillo, 1996. "Social security in a non-altruistic model with uncertainty and endogenous fertility," Journal of Public Economics, Elsevier, vol. 60(2), pages 283-294, May. [Downloadable!] (restricted)
  6. Smith, Alasdair, 1982. "Intergenerational transfers as social insurance," Journal of Public Economics, Elsevier, vol. 19(1), pages 97-106, October. [Downloadable!] (restricted)
  7. Blackorby, Charles & Donaldson, David, 1984. "Social criteria for evaluating population change," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 13-33, November. [Downloadable!] (restricted)
  8. Razin, Assaf & Ben-Zion, Uri, 1975. "An Intergenerational Model of Population Growth," American Economic Review, American Economic Association, vol. 65(5), pages 923-33, December. [Downloadable!] (restricted)
  9. Enders, Walter & Lapan, Harvey E, 1982. "Social Security Taxation and Intergenerational Risk Sharing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 647-58, October. [Downloadable!] (restricted)
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  10. Townley, Peter G. C. & Boadway, Robin W., 1988. "Social security and the failure of annuity markets," Journal of Public Economics, Elsevier, vol. 35(1), pages 75-96, February. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. CREMER, Helmuth & GAHVARI, Firouz & PESTIEAU, Pierre, 2004. "Pensions with Endogenous and Stochastic Fertility," IDEI Working Papers 305, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  2. Sinn, Hans-Werner, 2005. "Europe's Demographic Deficit," Discussion Papers in Economics 934, University of Munich, Department of Economics. [Downloadable!]
  3. Volker Meier & Matthias Wrede, 2005. "Pension, Fertility, and Education," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  4. Luciano Fanti & Luca Gori, 2008. "Fertility-related pensions and fertility disincentives," Economics Bulletin, Economics Bulletin, vol. 10(8), pages 1-7. [Downloadable!]
  5. CREMER, Helmuth & GAHVARI, Firouz & PESTIEAU, Pierre, 2004. "Pensions with Heterogenous Individuals and Endogenous Fertility," IDEI Working Papers 313, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  6. Robert Fenge & Jakob von Weizsäcker, 2006. "Mixing Bismarck and Child Pension Systems: An Optimum Taxation Approach," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  7. Robert Holzmann, 2005. "Demographic Alternatives for Aging Industrial Countries: Increased Total Fertility Rate, Labor Force Participation, or Immigration," IZA Discussion Papers 1885, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Gugushvili, Alexi, 2007. "Giving the ageing of the population how can countries afford pay-as-you-go social insurance pensions?," MPRA Paper 2869, University Library of Munich, Germany. [Downloadable!]
  9. Roel Beetsma & Heikki Oksanen, 2007. "Pension Systems, Ageing and the Stability and Growth Pact," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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